House, Senate Panel Passes Pension Stopgap
Measure

April 1, 2004 (PLANSPONSOR.com) - U.S. House of
Representatives and Senate conferees have adopted a stopgap
pension proposal that now goes to the floors of both chambers
before it can head to President Bush for his
signature.

>Time was of the essence in the passage of the bill.
Not only does the measure need to be approved by the
President before companies make their quarterly
contributions on April 15
th
, but the House is scheduled to adjourn at the end of this
week, meaning action on the pension relief bill had to be
completed by tomorrow.

>The last sticking point that threatened to seriously
impede the bill’s progress heading into the legislative
recess tomorrow was the treatment of multiemployer defined
benefit plans.
In the version passed by the joint House and Senate
committee this morning multiemployer plans are allowed to
defer the amortization of 80% of the plan’s 2002 net
experience losses for two years.
However, “in order to target funding relief only to those
multiemployer plans most in need – those plans that
experienced significant losses as a result of low interest
rates, sizable market investment losses, and an expanding
number of retirees,” multiemployer plans would only qualify
if they meet the following thresholds:

the plan had a net investment loss of 10% or more for
2002

the plan’s actuary certifies that the plan is
expected to have a funding deficiency in 2004, 2005, or
2006. The certification must be based on the same
actuarial assumptions used in the 2003 plan year

the plan had not failed to timely pay any excise tax
imposed by the IRS

the plan had not had a funding holiday for
contributions in excess of $0.10 per hour

the plan had not previously received waivers from the
IRS.

>Further, conferees agreed to specify that
multiemployers could not increase benefits during the
deferral period, unless the benefit increase was already
negotiated under an existing collective bargaining
agreement or if contributions to the plan exceed the annual
charges attributable to the benefit change.

>Aside from the multiemployer language, the two sides
are in general agreement about provisions of the bill.
The final bill includes agreed-upon, targeted relief
for steel and airline companies, as well as a broader
two-year provision changing the standard that employers
must use to determine their pension liabilities. Instead of
the 30-year Treasury bond interest rate, which has been the
test, employers could use corporate-bond rates, which have
a higher yield and therefore reduce the present value of
their pension liabilities.

>However, earlier in the day S
enate Democrats expressed their displeasure with the
measure.
A spokesman for Senator Edward Kennedy (D –
Massachusetts) told Reuters the latest offer is too similar
to the one rejected on Friday.
“It’s difficult to imagine something like this getting
through the Senate,” spokesman Jim Manley said.

>House Republicans though insist they are not are not
intentionally trying to be difficult, but insist the latest
proposal reflects pressure from the White House.
With the release of previous version of the bill, President
Bush has threatened to veto anything with even the word
“multiemployer” in it.

“The proposal adopted by conferees today is a fair
and responsible proposal that meets the goal that
conferees agreed upon, which was to target multiemployer
relief only to those plans most in need. Most
importantly, I believe this compromise is a proposal the
President will sign,” Representative John Boehner
(R-Ohio), chairman of the joint panel, said in a news
release.